The Value of A Commercial Assessment in Supporting a Transaction

When a company decides to seek a strategic development or commercial partner for an asset, the first inclination is often to identify the likely buyers and begin conversations about a potential deal. However, entering a deal process without first having a full understanding of the product’s advantages, disadvantages, and commercial potential reduces the odds of a successful deal outcome. Conducting a complete commercial assessment for an asset before beginning deal discussions allows a greater chance of getting a deal done at the best possible value. This is especially true for assets at later stages of development where the target product profile is well understood and the commercial assessment can have the greatest impact.

Key goals in conducting the commercial assessment include:

  • Sizing the pie: A complete understanding of key commercial variables such as market size, market share and pricing will provide the foundation for a realistic revenue forecast. Conclusions about revenue potential and fair deal value are much more convincing to a potential partner when assumptions are defended with market research, and can therefore provide a valuable negotiation tool.

  • Preempting partner objections: An assessment should include market research with potential prescribers demonstrating a clear unmet need that is addressed by the differentiated asset, particularly when a product will compete in a crowded or genericized space or against a dominant and established player. The ability to demonstrate that the asset has a clear and sustainable advantage that will translate into market share can address a partner’s concerns before they become deal killers.

  • Providing content for selling materials: Snapshots from a well done commercial assessment can and should comprise a good portion of the selling documents used in initial outreach and discussions with partners. Although many companies often focus on scientific data in their teasers and management presentations, it is at least as important to convince a partner of the commercial viability of the product early in the discussion.

  • Controlling the product positioning: Potential partners are sure to conduct their own market research, but may miss subtler points of differentiation if they conduct it in a vacuum. Thorough and defendable work done by the seller can establish the target profile and influence the buyer’s assessment methodology to enable the right conclusions to be reached. Locust Walk is often asked to present commercial assessment results to buyers’ key commercial decision makers, and the seller’s commercial assumptions are often used directly in the buyer’s model.

Although conducting a thorough commercial assessment does consume time and resources, the resulting understanding of an asset’s commercial potential and positioning will pay large dividends by maximizing the chances of successful partnership. More information on the rationale and methodology for a commercial assessment will be discussed at Locust Walk Institute course on “Growing Your Company Through Transformative Transactions,” taking place on September 14th and 15th in San Francisco.

Register by August 15th to get the early bird discount.

Locust__0008_Nick_DeLong_EX Written by Nick Delong